Small businesses in Scotland are more optimistic than at any time in the last two years, according to an industry body.
The Federation of Small Businesses (FSB) Small Business Index for the first three months of 2024 shows confidence back into positive territory at plus 10.7, higher than the UK average of plus 5.5.
The organisation believes the growing optimism reflects improvements in consumer spending and the economy more generally.
The FSB cautioned there are clear signs of the strong headwinds continuing to face small businesses, however, as more firms reported falling revenues and staff numbers than experienced growth.
Andrew McRae, FSB Scotland policy chairman, said: “It is very welcome that we are starting to see the first green shoots of economic recovery, with nearly two in five small businesses in Scotland planning to expand in the coming year.
“But after two hard years of the post-Covid cost-of-doing-business crisis, we can’t take sustained recovery for granted. Our members’ experience shows it remains a tough business environment with sharply increased costs across the board.
“It’s therefore vital the new First Minister puts growth and the needs of small businesses at the heart of his agenda. That means delivering on the most significant planks of the New Deal for Business, and in particular ensuring there is a fuller assessment of the impact on small businesses whenever any new regulations are brought forward.
“There’s also a pressing need to accelerate work to understand the cumulative impact of regulations on small businesses.”
The SBI found more than a third of small businesses (34.8%) in Scotland expect their performance to improve in the next three months, compared to less than a quarter (24.1%) which expect it will get worse.
The findings represent the most positive outlook since the first three months of 2022 and follow three consecutive quarters of negative sentiment.
More than four-fifths of firms in Scotland (83.2%) experienced rising costs, however, largely due to increased utility bills, rents and wage bills.
The proportion reporting revenue decline (33.9%) also exceeded the number reporting an increase (31.3%), while slightly more firms experienced a contraction in employee numbers (11.5%) than an increase (10.6%).
A Scottish Government spokesperson said: “The First Minister has made clear that economic growth is a priority.
“As a result of actions set out by the New Deal for Business Group, business and government have been working together to help shape how policy is developed.
“This includes a newly established Regulatory Review Group which is already engaging with business on a range of policies, from Heat in Buildings to minimum unit pricing and vaping.
“Engaging with businesses early in the policy-making process ensures they can input, react and prepare for implementation.”